Sunday, September 16, 2012

Economic Recovery: How Did Successful Presidents Do It?

From a political perspective, the best time for a new
president to take office is either during or immediately after a recession.
Given the pattern of political and business interaction over the past century,
any new president is likely to inherit the politically induced economic
imbalances bequeathed by previous presidents and congresses. Recessions are the
painful but necessary corrections of those imbalances, when businesses readjust
their production, processes, and workforces to better fit the demand for their
products.

In this, the Obama administration has two reasons to be
thankful for their inheritance. Although Democrats already controlled the
Congress in 2008, their opponents’ party held the White House when the
recession hit. That eased their way to power and they entered office with the
economy in the process of cleaning itself out. All they had to do was to let businesses
sort themselves out, let the legal system do its job, and to wind down the
bailout programs implemented by their predecessor.

But, as we know, they didn't do that. Instead, they added
more money and their own politically inspired micromanagement of the bailouts
and “stimulus” programs. The February 2009 stimulus package added more than
$700 billion to a budget that was already in deficit. While it might have made
life easier for a few mayors and governors, it saddled each American with an increase
of more than $2000 as their share of new public debt. This was followed by the
passage of two Leviathan-sized regulatory bills: one that pulled more of the
healthcare and insurance industries under federal control, and another that
further centralized federal control over the financial industry.